Harding v Petzetakis Africa (Pty) Ltd (JS 1024/2009) [2011] ZALCJHB 81 (14 September 2011)

Principle:

It is an automatically unfair dismissal if an employee is dismissed for refusing to dismiss two other employees without any kind of hearing, in breach of the provisions of the LRA and the Constitution governing an employee's right to fair labour practices.

Facts:

The applicant was employed for 22 years by the company. The chairman and CEO of the company instructed her to summarily terminate the services of two employees. Knowing that to do so was in breach both the LRA and the Companies Act, she refused. She was dismissed.

The applicant argued that her dismissal was automatically unfair because the employer acted contrary to s 5 (2) (c) (iv) of the LRA. That section read with section 187 (1) deems a dismissal to be automatically unfair if an employer acts contrary to that section because it dismisses the employee because of that employee's "...past, present or anticipated... failure or refusal to do something that an employer may not lawfully permit or require an employee to do;..."

The company admitted that it summarily dismissed the applicant, but denied that it did so for an impermissible reason or that it retrenched her. However, at the time the applicant's services were terminated the employer provided no reason for the termination. The termination letter of that date merely stated, "We regret to inform you that your employment at Petzetakis Africa is hereby terminated with immediate effect." The letter also contained an offer of a severance package of 10 months' of the applicant's total cost to company remuneration on the basis that she accepted the same in settlement of all her claims against the company arising out of her employment or termination thereof.

The employer later listed alternative justifications for the applicant's dismissal. Principally, it claimed it had lost confidence in the applicant in view of the company's loss-making situation by mid-2009, which demonstrated her ineffectiveness and/or negligence in failing to curb the losses. Secondly, it said the applicant failed in her duties as the company's managing director in a number of respects namely: loss of market share; increased inventory levels; cost under-recoveries; losses on bad debts; competition commission penalties; inability to increase margins; negative cash flows; loss of major customers, and insufficient attention had been paid to improving the firm's BEE status all of which the applicant failed to improve. It was only when the pre-trial minute was concluded that it stated expressly that it terminated the applicant's services for "poor performance and/or misconduct".

The court was satisfied that the applicant was asked to dismiss two employees without any kind of hearing and that had she done so she would have breached the provisions of the LRA and the Constitution governing an employee's right to fair labour practices. In this sense she was expected to do something unlawful and, whatever legitimate reasons might have been relied upon instead, it was this impermissible reason which was the principle cause of her dismissal. The court found that it was an automatically unfair dismissal.

The court did say that the unlawful character of what the applicant was expected to do was civil not criminal, and this diminished the seriousness of the employer's infringement of section 187. Nevertheless the court ordered compensation equivalent to 13 months' remuneration (amounting to R 1,813,500-00); three months' notice pay (amounting to R 418,500-00); the pro-rata balance of her bonus for the three month notice period, (amounting to R 46,500-00); and twelve days' leave pay (amounting to R 55,800-00). The employer also had to pay the applicant's costs, including the cost of two counsel.

Extract from the judgment:

68 All of the factors mentioned above, in my view, support the conclusion that the employer most probably decided to dismiss the applicant when she did not unhesitatingly comply with the instruction to summarily dismiss Herbst and Van der Vyfer. The issue which vexed the CEO at the time was whether or not she accepted his authority unquestioningly even when his instructions required her to do something unlawful and which, in her understanding was not in the best interests of the company to which she owed a fiduciary responsibility as a director.

69 In the circumstances, the reasons advanced for the dismissal in the respondent's answering statement appear to have been essentially ex post facto efforts to rationalise the dismissal on legitimate grounds. If at the time, the respondent had acted less impetuously and imperiously, and if it had deliberated more carefully before acting I accept that it might have taken a decision to dismiss the applicant on the basis of more plausible and legitimate reasons. However, such reasons that it might, with the benefit of hindsight, have relied upon cannot be retrospectively inserted into the historic chain of causation which resulted in her dismissal at the time.

70 It was suggested in argument, that applicant's refusal to dismiss the two employees without due process was merely the final straw and accordingly cannot be construed as anything more than the last factor which had a bearing on the company's decision to dismiss the applicant. In this regard, the respondent relies on the increasingly demanding and sharp tone of Petzetakis' communications to the applicant from late May 2009 which the applicant conceded.

71 The difficulty I have with this argument is that even if the feedback on the measures initiated by the applicant was increasingly critical and negative from this time, it seems inescapably clear from the ultimatums given to the applicant that if she complied with the two instructions her job was not at risk. Correspondingly, if she did not comply, she would be facing dismissal. In these circumstances, it is difficult to see her failure to comply with the instructions as anything less than central to the actual decision to dismiss her.

72 Another point which was raised by the respondent was that the applicant's characterisation of the instruction she was given merely reflected a difference of opinion between two directors about whether summary dismissal was permissible or not. However, it appears to me that the difference went much deeper than this. It is true that the applicant clearly believed that there was no good reason for Van der Vyfer's dismissal because she had been acting on the applicant's own instructions at the time. Petzetakis did not even engage with the issue of whether summary dismissal would be lawful or not, so a difference of opinion on that issue is difficult to discern.

73 Quite apart from this, the fundamental difference between Petzetakis's instruction and the applicant's approach, is that Petzetakis was simply not willing to give the applicant an opportunity to even attempt to comply with the requirements of the LRA to ensure as far as possible that the unfair dismissal provisions of the Act were not flouted: it was not that he advanced any rationale why it would not be unlawful to proceed in the manner he wished.

74 It was also argued, though unsupported by any authority, that the applicant had not demonstrated that it would have been unlawful for her to proceed with the summary dismissals as instructed. It might have been true that, at least in the case of Herbst, a case might have been made out that her dismissal was substantively fair. However in both instances, if the employees were dismissed without a fair hearing, the dismissals would in all likelihood have been in breach of the requirements of a procedurally fair dismissal under the LRA. Even if the company had good substantive grounds for summary dismissal, which is very unlikely in Van der Vyfer's case, if the respondent wished to ensure that it did not flout the provisions of the LRA governing the procedural fairness of dismissals and the associated constitutional right to fair labour practices, then it could have acceded to the applicant's proposal that a proper disciplinary process be initiated. Instead, the instruction was to forge ahead regardless.

75 I do not understand why such action would not be construed as unlawful if it would entail a breach of a statutory and constitutional right.

76 It must also be mentioned that a considerable effort was made by the respondent to persuade the court in argument that it should take a robust view of the dismissal of an executive employee in the position of the respondent. In this regard, the respondent placed much reliance on the LAC decision in HPN Brereton v Bateman Industrial Corporation Ltd & Others (Unreported Case no JA 80/99). In essence, the argument was that when it comes to the case of an executive employee the court should be wary of applying stringent standards in assessing the procedural fairness of the dismissal. Similarly, because of the degree of accountability that goes with positions such as that of CEO, if the incumbent fails to measure up to the performance standards set by the employer, the court should be slow to interfere with the employer's judgement in deciding to end the employment relationship when the employer decided that it had lost confidence in that individual.

77 However, in this case because I believe it is clear on the evidence that the employer has failed to displace the b prima facie case that principal reason for the employee's dismissal at the time was her refusal to summarily dismiss the two employees without a hearing, it does not assist it to try and persuade the court that it did have grounds to fairly dismiss the applicant on the basis of poor performance or misconduct, on the standards adopted in the Bateman case. There was no evidence tendered by the respondent which could explain away the natural inferences to be drawn from the conduct of its senior office bearers after the instruction to dismiss Herbst was issued, which could demonstrate that its actions were in fact founded on an assessment of the applicant's performance over the course of a number of years. It was best placed to substantiate what lay behind its actions in the fortnight leading to the applicant's dismissal, but chose not to do so. In the light of the evidence of the respondent's actions over the fortnight leading to the applicant's dismissal context, the respondent's unwillingness to expose its own reasoning at the time to scrutiny substantially weakens its attempt to persuade the court that it probably did dismiss the applicant for a permissible reason which it only articulated some months later.

78 The applicant made out a b prima facie case that what was at stake at the critical time when the decision to dismiss her was taken, was her unquestioning obedience to the dictates of the CEO to the point of implementing an instruction which required her to do something unlawful. The respondent has failed to address this issue directly and the evidence for a performance based, or similar legitimate reason for the dismissal, does not answer the applicant's case.

79 In any event, I agree with the applicant's submissions that her position was not really on a par with the CEO in Bateman's case. The primary measure of her performance was the operational performance of the firm. She did not have the autonomy to make decisions even in respect of operational issues and was always subject to the dictates of detailed instructions from Greece.

Conclusion

80 In summary, I am satisfied that the applicant was asked to dismiss two employees without any kind of hearing and that had she done so she would have breached the provisions of the LRA and the Constitution governing an employee's right to fair labour practices. In this sense she was expected to do something unlawful and, whatever legitimate reasons might have been relied upon instead, it was this impermissible reason which was the principle cause of her dismissal.